INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS  

Division 355 - Research and Development  

Subdivision 355-I - Application to earlier income year R & D expenditure incurred to associates  

SECTION 355-480   Notional deductions for expenditure incurred to associate in earlier income years  

Notional deductions for earlier year associate expenditure

355-480(1)  
An *R & D entity can deduct for an income year (the present year ) expenditure it incurred to its *associate during an earlier income year to the extent that:


(a) the expenditure was incurred on one or more *R & D activities:


(i) for which the R & D entity is registered under section 27A of the Industry Research and Development Act 1986 for an income year; and

(ii) that are activities to which section 355-210 (conditions for R & D activities) applies; and


(b) the expenditure is paid to that associate during the present year; and


(c) subsection (2) applies to the expenditure.

Note 1:

This section applies in a modified way to R & D partnership expenditure (see sections 355-510 and 355-515 ).

Note 2:

Expenditure paid in income years starting on or after 1 July 2011 may be deductible for activities registered for income years starting before 1 July 2011 (see section 355-200 of the Income Tax (Transitional Provisions) Act 1997 ).

Expenditure cannot have been otherwise deducted etc.

355-480(2)  
This subsection applies to the expenditure if:


(a) the *R & D entity can deduct the expenditure, or is entitled to a *tax offset for the expenditure, under any other Division of this Act for an earlier income year; and


(b) by the time of lodging its *income tax return for the most recent income year before the present year, the R & D entity had neither:


(i) deducted the expenditure; nor

(ii) obtained a tax offset for the expenditure;
as described in paragraph (a).

355-480(3)  
The entitlement to the deduction, or *tax offset, described in paragraph (2)(a) ceases to the extent that subsection (2) applies to the expenditure.

Example:

If, by the time mentioned in paragraph (2)(b), an R & D entity chose to deduct only a third of the expenditure it could have deducted under another Division, then the remaining 2 thirds of that expenditure:

  • (a) can be deducted under this section; but
  • (b) can no longer be deducted under the other Division.
  • Notional deduction is subject to integrity rules etc.

    355-480(4)  
    This section has effect subject to section 355-225 (excluded expenditure), Subdivision 355-F (integrity rules) and subsection 355-580(3) (CRC contributions).


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